Determinants of Formulary Placement in Medicare Part D

Tuesday, June 12, 2018: 1:30 PM
1000 - First Floor (Rollins School of Public Health)

Presenter: Annabelle Fowler

Discussant: Matthew Schmitt


This paper examines how plan, drug and market characteristics affect the formulary placement of prescription medications in Medicare Part D. My analysis studies MA-PD and PDP formulary placement and plan generosity for a number of therapeutic classes, relying on data from the universe of Part D formularies. I merge information about formulary design to the specific pharmacy benefit manager (PBM) associated with each Part D plan.

Price negotiations between PBMs and pharmaceutical companies are an important determinant of formulary placement, and I examine the fundamental factors that affect their likely bargaining positions in these negotiations. Plans also have incentives to design formularies that attract beneficiaries who use drugs in therapeutic classes associated with profitable health conditions. To test the extent to which this happens, I develop a measure of plan generosity across therapeutic classes, and exploit variation in the profitability of certain classes and plan differences across MA-PD and PDP formularies.